Should a partner die, the widow (widower, civil partner or other financial dependants) of the partner, could potentially be in a difficult financial position. The only, or at least a significant, source of income may have vanished (though there may be an entitlement to some form of pension). It is very unlikely, and most likely legally impossible, that the partner’s family will be in a position to step into the partner’s shoes.

The overwhelming likelihood is that they will be entitled to the value of the deceased’s interest in the partnership via the partner’s Will. Equally likely, is that they will probably have no interest in the business or will not be technically able to take part in it. The most obvious course of action for the personal representatives of the deceased partner will be to dispose of the deceased’s partnership interest to the surviving partners.

Without an agreement specifying what is to happen, the partnership will be dissolved on the death of a partner. Strictly speaking, the personal representatives will only have a right to a share of the dissolution value of the partnership.

In practice though, in many cases, the surviving partners are likely to want to continue to trade and so a deal to buy the deceased’s interest/compensate the personal representatives for their rights to a share in the partnership assets will need to be agreed. Of course, the personal. Where the partners have agreed, on the death of one of them, to dissolve the partnership and realise the value of its assets, thereby being able to pay to the deceased’s estate their share of the value of the business, and all partners are happy with the financial, commercial and lifestyle consequences of this, there would be no need for additional cash through insurance.

Where the partnership is to continue, the surviving partners will need to be able to buy the deceased partner’s share from the deceased’s estate. Naturally, to achieve this they need money. The major requirement of a deceased partner’s family following the partner’s death will, in all likelihood, be cash.

The simple solution is to plan ahead. In this way it might be possible to avoid completely, the need to borrow money and all the problems this involves including the possible difficulty in accessing funds, the potentially high costs of interest and repayment.

A life assurance (and/or critical illness) plan on the life of each of the partners is a means by which funds can be provided at the time they are most needed – on the death of the partner, or when the partner suffers a critical illness.

The solution to the problems faced by many partners lies in the proper use of life assurance plans (held in trust), in conjunction with a properly drafted partnership agreement.

To discuss this in more detail please call the office on 0800 6342 111 or send an email to This email address is being protected from spambots. You need JavaScript enabled to view it.